Commercial Sales Lift EADS ; Profit Rose 19% in 2012 for Parent of Airbus Even as Military Side Struggled

Article excerpt

The company says it made EUR 1.2 billion in 2012, thanks to
commercial aircraft sales, even though its military segment
struggled under the weight of budget troubles in the United States
and Europe.

European Aeronautic Defense & Space, the parent company of
Airbus, reported on Wednesday a 19 percent increase in net profit
for 2012, propelled by sales of commercial jets and helicopters,
while its military business continued to struggle as budget
pressures squeezed U.S. and European military spending.

The company, based in Toulouse, France, said earnings for the
full year climbed to EUR 1.2 billion, or $1.56 billion, from just
over EUR 1 billion in 2011, on a 15 percent rise in revenue, to EUR
56.5 billion. The company proposed an increase to its 2012 dividend
to 60 euro cents per share from 45 cents in 2011.

Almost all of the group's revenue gains came from double-digit
growth in sales of civilian aircraft, while military orders stalled.
Airbus, which increased its commercial jet sales 19 percent,
represented 68 percent of group revenue, little changed from a year
earlier.

The persistent weakness of the group's military business comes as
EADS is steeped in a fundamental review of its business strategy. A
proposed merger with BAE Systems of Britain failed amid political
divisions among Germany, France and Britain.

Much of the logic behind the merger project was based on the
expectation that a combination with BAE Systems, a major contractor
to the U.S. government, the world's biggest spender on military
equipment, would help to bring greater balance between commercial
and military activities.

At a briefing in Berlin, Thomas Enders, the chief executive,
said EADS expected to share the outlines of its new strategy around
the middle of the year. But he hinted strongly that the group was no
longer fixated on its previous target of at least 40 percent of
military revenue by 2020.

Given the current budget constraints facing Western governments,
Mr. Enders said, "it's probably not such a bad thing to have rather
less exposure to the defense market." He said that EADS's main U.S.
rival, Boeing -- which derives 40 percent to 50 percent of its
revenue from military sales -- was growing increasingly reliant on
its civilian aircraft business as well.

"Right now, I am quite happy with the imbalance we have," Mr.
Enders said. "We are under less pressure than other, pure defense
companies."

EADS began a restructuring last year of its Cassidian unit, which
groups most of its military activities, including Eurofighter, the
EADS-led consortium that builds the Typhoon fighter jet. Operating
profit at the unit, which announced 850 job cuts last year, plunged
57 percent to EUR 142 million, in large part because of nearly EUR
200 million in charges linked to the restructuring.

Analysts warned that the outlook for EADS's military business was
likely to get worse before it got better. "There is clearly the risk
of more of this to come as France and Germany have only just begun
the process of addressing their defense budgets," Nick Cunningham,
an aerospace analyst with Agency Partners in London, wrote in a note
to clients. …